Liquidity Providers

Liquidity Providers contribute towards a fundamental function of the DEX - permissionless swaps. To incentivise deep liquidity across the platform, liquidity providers are programmatically compensated with rewards. On Beets, Liquidity Providers can earn rewards from three sources: Swap Fees, Yield Bearing Tokens and Staking Incentives.

Swap Fees#

Anytime a trade takes place on the DEX, the pool that was used to facilitate the trade collects swap fees. This fee is shared amongst Liquidity Providers and the treasury. The swap fee differs from pool to pool depending on the pool type and the underlying assets. Liquidity Providers automatically earn swap fees without having to claim any rewards.

Upon investing in a liquidity pool, users receive Beets Pool Tokens (BPTs) that represent their share of the pool. Over time, the pool collects swap fees from traders, and these fees are reinvested into the pool. The Liquidity Providers’ share of the pool stays the same (BPTs), but the value of the pool increases due to the collection of fees. Swap fees are a key source of yield for liquidity providers. This yield is automatically reinvested into the pool and users never need to harvest these rewards, instead, the value of the pool will increase.

Yield Bearing Tokens#

Yield-bearing (YB) assets are tokens that continuously increase in value due to an underlying yield generation mechanism. Examples include staking derivatives like wstETH, rETH, and stS, which appreciate from staking rewards, as well as assets like aUSDC, aETH, and aDAI, which serve as receipt tokens for deposits in Aave.

Any token deposited into a yield-generating mechanism that accrues value qualifies as yield-bearing. Boosted Pools exemplify this concept, allowing liquidity providers exposed to YB tokens to earn additional revenue through interest-bearing yield. Similar to swap fees, this value accrues naturally within the token, eliminating the need for users to actively claim rewards.

Staking Incentives#

Some pools on the DEX will offer additional staking incentives, alongside Swap and Yield Bearing Token rewards. While Swap Fees and Yield Bearing Token rewards are automatically earned by users providing liquidity, users must stake their LP tokens to earn these additional Staking Incentives. These incentives are typically rewarded in BEETS (via the Beets Budget or Gauge Vote), but can also be in any incentive token from external DAOs or protocols that wish to directly incentivize liquidity pools on Beets.